This is a gift that my father gave me when I was about nine years old that I will be forever grateful for. The lesson he taught me was how to manage my money. I have been doing this with my kids since they were about 9-10 years old and they have enjoyed getting and spending the money! They have also learned some wonderful lessons about managing money and at times, how easy it is to spend money but how it sucks to have to then take it out of the appropriate column!
I wanted to teach them about money management while they are in a safe environment. They are not going to go into credit card debt or lose their house, for obvious reasons but they are learning how it feels to spend their own money and maybe too much at times. It’s fun to buy pizza for your friends until your bank statement shows up and then you have to withdraw the funds from the appropriate column.
How are they learning to manage their money? It’s a very simple system….
Step 1: Take your kids to the bank to set up a bank account and to get a debit card.
Step 2: Print out an Excel spreadsheet with the following headings: savings/clothing entertainment/ miscellaneous. You can add cell phone/car etc. Anything else that is important to your child. (In my day, I did this on a sheet on lined paper!)
Step 3: Put a percentage of how the money will be allocated. Savings is an automatic 10 or 20%. Clothing could be 20%, Entertainment 30%, cell phone 20%…you get the idea – just as long as it adds up to 100%.
Step 4: Each month $40 is deposited into their savings account. I let them build up a base for 6 months before I set further ground rules. Each month when they received their bank statement, they would allocate the established percentage of their money into each column. Each month they must balance their spreadsheet to their bank statement (we picked 10 days from the time the statement arrived so that they knew there was a deadline to complete the task)
Side note: Every month they are guaranteed to get $40. The idea of this exercise is to teach them how to manage money not to use it as leverage to get things done (although my kids do help out around the house!)
Step 5: When they had saved for 6 months and accumulated a base in each column, (clothes, entertainment, miscellaneous, etc.), we set some ground rules. Just as adults have to pay bills and manage their money effectively, so do children.
When they purchase an item, it has to be taken out of that column. Say they bought a slice of pizza – that comes out of entertainment. They paid for part of their shoes (I pay up to a certain amount and then they have to pay the rest.) that would be subtracted from their clothing column and so on. You decide how you want to run the show. I don’t pay for junk food, I pay a certain amount for their clothes and then they pay the rest, I don’t buy them clothes if they aren’t necessary, they spend money on their scooters and are saving up for phones. These are all great points to discuss with them. You are teaching them the value of money – what’s important to them.
Step 6: The savings column is a no withdrawal column. Ever 6-12 months, this money is deposited into an investment account for future use.
Having my children save and contribute to their purchases reduces conflict because it allows them to invest in what they want to buy or perhaps they decide they really don’t want it. I am empowering my children to take responsibility for the items that they are purchasing. When they purchase their own items, they take better care of them, they respect them and they learn what it feels like to make these decisions. There have been times they have regretted spending money on something and this is great that they are making these connections. I’ve bought things that in hindsight I bought on impulse.
There will be some struggles and you may not like what they are spending their money on but this is such a fabulous teaching tool. My kids did spend too much money and basically took some of their columns down to $0.00. They asked me to take away their debit card but I said, “Boys you need to learn how to manage your money. You have to understand what it feels like to pay for something and then when your bank statement shows up that it wasn’t the best choice to have made.” They have learned that they can get emotionally caught up in spending money – its fun and seems to fall from the sky. But they have also learned that it sucks to have to take it out of a column – and thus, is not an endless supply.
How to Get Rich – Part of James’ Grade 7 speech
You could buy lottery tickets hoping for the big win but unfortunately you’d have a better chance of being hit by lightning. If, however, you took the money each week that you would have spent on a lottery ticket and saved it, you would be on your way to getting rich.
Each month I earn $40 which is deposited into my bank account. My mum has set me up on a plan teaching me how to save and manage my money and I’m going to share these tips with you today.
One of the rules to get rich is to pay yourself first. Every time I put money in the bank I put 10% in my savings column. I cannot touch this money.
Secondly, I have a column for entertainment, clothing and miscellaneous and each month I allocate a fixed percentage of money to each category. This means that when I do want to buy something I only have the amount of money available to me in that column. This requires discipline to only spend what I have in that column. This will help me in the future to properly manage my money when I have to pay for things such as insurance, gas and maintenance on my car.
The third way to become rich is to start early and give yourself time, this requires patience and discipline. I’m going to explain compound interest.
If I make a one-time $5000 contribution, making an average of 8% per year, to my savings at the age of 20 and I never touch it, I will have $160,000 at the age of 65.
However, if I wait until I’m 39 to put the $5000 in my savings, I will only have $40,000 at the age of 65. That’s $120,000 difference. WOW.
To become even richer, if I make regular investments of $5000 per year, making an average of 8% per year, into my savings staring at age 20 until 65, I will have $1.93 million. Double WOW…that’s the difference of $1.81 million, just be starting early and making yearly contributions to my savings account.
I’ve mentioned three ways to get rich….here are a few ways on how not to be rich…
You can’t resist the newest iPhone, the most fashionable clothes, the fanciest car, or a vacation.
You spend too much money in the short term and you don’t think about the long term.
You don’t take the time to learn about saving and managing your money.
The real risk you face is that you’ll be flattened by modern life’s financial elephant: the failure to maintain strict long-term discipline in saving and investing.
Spend money wisely -if you can buy two of a big ticket item (like iPods, trampolines etc.) then you can buy it, if not wait, save up and then you can buy it.
What does rich mean to you?? Does it mean getting the latest iPhone, buying designer clothes, living in a fancy house, driving fast cars and going on exotic vacations? Or does it mean having meaningful relationships, freedom, & passion in your life.
|Tanya Morrison has been in the Health/Wellness and Fitness Field for over two decades. She has coached and trained many clients over the decades. She is a certified Personal Trainer, Precision Nutrition Level 1 Nutrition Coach, Pilates/Aerobics/Yoga Instructor and more. She is the creator of the Busy Mama Reboot 3 week on-line program which runs monthly and the Busy Mama Detox which is a 12 week on-line program that runs in January, April and September of each year. To find out more about these life changing programs check out the testimonials and information at www.busymamadetox.com. Tanya also teaches many different classes at Move Your Body Studio in Bobcaygeon, www.moveyourbody.ca and has written Healthy Snacks for Kids, Get the Skinny on Skinny Jeans & Living Vibrantly with Raw Goodness – Your Guide to Juicing & Blending. Her blog, www.tanyamorrison.ca has lots of great articles to help you navigate your way to the healthy life you want, tons of recipes and great tips!|